PLANSPONSOR - October/November 2021 - 14

UPFRONT
HSAs: Big
Benefits,
Little Work
AT THE 2021 PLANSPONSOR HSA
[Health Savings Account] Review conference,
held in October, Christine Keller, a
principal at Groom Law Group, Chartered,
and Jamie Greenleaf, senior vice president
at OneDigital Retirement + Wealth,
discussed regulations applicable to HSAs,
and employers' responsibilities regarding
HSA investments.
Plan sponsors have limiated administrative
duties when it comes to HSAs,
Keller said. These primarily concern the
way employees' contributions get from
payroll to their HSAs, which are held by an
HSA administrator, she explained.
HSAs are owned by the individual,
Greenleaf concurred, so employers aid
only in their administration. That is, the
benefit is not explicitly tied to an employer.
An employer may offer an HSA
benefit as part of its cafeteria plan, Keller
noted. This allows an individual to make
HSA contributions on a pre-tax basis to
avoid income tax withholding from wages
as well as several other taxes. By way
of a cafeteria plan, employers can also
contribute to an employee's account.
Contributions may also be made
outside of a cafeteria plan-subject to
Internal Revenue Code [IRC] Section
4980G-on an after-tax basis, with a
corresponding deduction available.
When HSAs were first enacted, the
Department of Labor (DOL) issued two
field assistance bulletins (FABs), boiling
down the rules for what employers could
and could not do. In FAB 2004-01, the DOL
provided guidance concerning when an
HSA benefit could be considered outside
the definition of the Employee Retirement
Income Security Act (ERISA). Specifically,
FAB 2004-01 provides that an employer,
if following several specific terms, may
TIDBITS
Pandemic
Savings
COVID-19 spurred
some of Principal's
top U.S. retirement
savers-1,408 plan
participants from
Generations X, Y and Z-to increase their saving
over the past 18 months. Among these " super
savers " -61% of whom deferred at least $17,500
to their plan last year-54% said they'd saved
more than usual, 43% said they'd saved the same
amount, and only 3% said they'd saved less.
The group reported that, through strategies such
as reducing or eliminating long-term payments
on homes and cars, they had little debt; 10% more
than last year said they'd decided to seek financial
independence earlier in life.
Source: Principal Financial Group
contribute to employees' accounts and
may select a single HSA provider to which
it will forward employer and employee
contributions without causing the benefit
to become subject to ERISA.
In FAB 2006-02, the DOL clarified
that an employer may take several actions
and still satisfy the requirements of FAB
2004-01 that allow employee HSAs to be
outside the scope of ERISA.
" We think of HSAs like individual
retirement accounts [IRAs], " Greenleaf
said. " Sponsors just need to withhold the
dollars and send them to the provider. " She
sees nothing wrong with having the HSA
benefit covered by ERISA, with its protections
and duties of prudence.
She, however, is not a fan of mirroring
14 PLANSPONSOR.COM October - November 2021
the investments on a sponsor's defined
contribution (DC) investment menu. " HSA
dollars are different from DC dollars, so
why use the same funds? " Greenleaf said.
" Plus, when an investment on the menu
is not prudent, does the sponsor have the
obligation to have the fund changed that
the HSA provider manages? "
She, instead, promotes a model portfolio
approach to investments based on
how employees use these accounts-for
long-term savings or short-term spending.
For employers that hesitate to trigger
ERISA governance, it is best to take a
hands-off approach, Keller said. " Sponsors
can find an administrator that offers
investment options and choose one of
them. " -Judy Faust Hartnett
http://www.PLANSPONSOR.COM
PLANSPONSOR - October/November 2021

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